Correlation Between ICL Israel and RSL Electronics
Can any of the company-specific risk be diversified away by investing in both ICL Israel and RSL Electronics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ICL Israel and RSL Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ICL Israel Chemicals and RSL Electronics, you can compare the effects of market volatilities on ICL Israel and RSL Electronics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ICL Israel with a short position of RSL Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICL Israel and RSL Electronics.
Diversification Opportunities for ICL Israel and RSL Electronics
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ICL and RSL is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ICL Israel Chemicals and RSL Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RSL Electronics and ICL Israel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ICL Israel Chemicals are associated (or correlated) with RSL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RSL Electronics has no effect on the direction of ICL Israel i.e., ICL Israel and RSL Electronics go up and down completely randomly.
Pair Corralation between ICL Israel and RSL Electronics
Assuming the 90 days trading horizon ICL Israel is expected to generate 2.14 times less return on investment than RSL Electronics. But when comparing it to its historical volatility, ICL Israel Chemicals is 1.06 times less risky than RSL Electronics. It trades about 0.06 of its potential returns per unit of risk. RSL Electronics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 61,800 in RSL Electronics on September 13, 2024 and sell it today you would earn a total of 19,450 from holding RSL Electronics or generate 31.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICL Israel Chemicals vs. RSL Electronics
Performance |
| Timeline |
| ICL Israel Chemicals |
| RSL Electronics |
ICL Israel and RSL Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICL Israel and RSL Electronics
The main advantage of trading using opposite ICL Israel and RSL Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICL Israel position performs unexpectedly, RSL Electronics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in RSL Electronics will offset losses from the drop in RSL Electronics' long position.| ICL Israel vs. Elbit Systems | ICL Israel vs. Bezeq Israeli Telecommunication | ICL Israel vs. Bank Hapoalim | ICL Israel vs. Teva Pharmaceutical Industries |
| RSL Electronics vs. Aran Research and | RSL Electronics vs. Al Bad Massuot Yitzhak | RSL Electronics vs. Analyst IMS Investment | RSL Electronics vs. Golan Plastic |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stocks Directory module to find actively traded stocks across global markets.
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